Having a savings account is essential once you start earning, as such a bank account can help you in securing your capital along with attractive interest rates.
Whether to start a venture or fulfil emergency financial needs, an individual may require quick funds. Adhering to the UAE Central Bank’s regulations and laws, all the banks in UAE provide quick liquid funds as personal and business loans. For some, getting a loan is easier than the others depending on various factors. One of the most important factors for loan approval is an individual’s credit score. However, a credit score is not the only factor that the banks consider for loan approval. An issuer analyses the complete financial profile of the applicant before sanctioning the loan. They may also do a background check of any past bankruptcy and debts. Further, they can go for salary and bank account details. The article below gives an insight into the various factors for loan approval in UAE.
Once the loans are approved, it gets credited to an individual’s bank account in UAE. However, loan approvals are subject to satisfying various criteria and factors. The bank may lend a loan to an applicant with a lower income and a decent credit score without prior debts. The issuer needs to make sure that you will timely repay your loan before providing you with the money. Once you fulfil their criteria, you are good to go. The bank/issuer considers the following factors for approving loans in UAE.
The financial bureau monitors and keep financial records of every individual and prepare a credit history based on their loans and repayments. An applicant with a better credit history has a higher credit score and is more likely to get a loan. However, the credit score doesn’t disclose all the aspects of the applicant’s financial performance. Hence, they may analyse your overall debts, foreclosures, past bankruptcy, unpaid collections and delinquent accounts (late repayments).
Having minor backlogs won’t affect your loan approval. However, they can influence your interest/profit rates and loan repayment tenure. In addition, any active loan may also impact your loan approval in UAE.
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An issuer always looks for the lowest risk while lending money. With a good salary and low fixed expenses, you have a decent chance of getting your loan approved by the bank. You can ensure the bank with timely repayment of instalments without failure. On the other hand, a higher income may constrain you to pay a larger interest/profit rate, especially if your fixed expenses like rent and mortgage are high.
Unsecured personal loans (loans without collateral) are based on your credit scores, and if you are new to loans, your credit score might be lower. In such cases, the banks consider your salary, expenses and overall debts for loan approval in UAE.
A shorter tenure of your loans ensures the bank that you can easily repay the borrowed money in bigger chunks and that it will not change over the loan tenure. Hence, you don’t seem to be a risk to the bank. Additionally, in a shorter loan tenure, even though you need to pay a higher instalment, you can get rid of debt sooner with a lower interest rate.
A down payment is money paid in the initial stages of getting a loan. If you pay a larger down payment, the bank can be lenient while deciding your interest rates. Moreover, you are a lesser risk to the issuer, assuming you have already paid a fraction of the loan amount. If your credit scores are low and rendering your loan approval, a bigger down payment may help you in getting the loan sanctioned. However, you must calculate if getting a loan at a lower interest/profit rate is more beneficial than paying a bigger down payment.
Although you are going to repay your loans with your income, the bank may want to know if your assets can be converted into cash in case you can’t pay off your loan. They can look for your liquid assets like deposits, investment accounts, stocks, bonds, etc. Your liquid asset can ensure convenient loan approval in UAE since you are a lesser risk to the issuer.
Collateral is security against your loan. The loan issuer can seize your collateral if you don’t repay your loan amount. For an individual applying for an auto loan or a house mortgage, the vehicle or the house becomes collateral. Such loans with collateral are also called secured loans as the bank keep them as their loan security. The bank offers a secured loan with lower interest rates in comparison to an unsecured loan. Applicants must be cautious while applying for secured loans with houses and vehicles as collateral as it can bring grave consequences in the event of non-repayment of the loans.
The bank/issuer may also consider your employment history for the loan approval in UAE. They want to make sure that you have a stable income to conveniently repay the borrowed money. This also gives an impression that you are not a risk for the issuer offering a loan. Any discrepancy in your employment history may result in non-approval of the loan or the bank may charge higher interest to compensate.
Now that you have known the factors influencing your loan approval, here are the ways on how you can maximise your chances of getting loans approved in the UAE.
Getting a loan approval can pave the way for you in your venture or provide you with financial stability during emergencies. However, even after having a good credit history, the banks may deny your loan request based on your income, prior debts, your financial stability, etc. To increase your loan approval chances, you need to make sure that you are not a risk to the issuer in any possible way. Consider the above-mentioned factors, plan your finances and then apply for the loan in UAE so that it gets approved successfully.